Today's Deep Dive is 1,270 words and an 8-minute read.
Almost five years after the COVID-19 pandemic turned the US labor market on its head, employees and employers are still trying to return to "normal." Inflationary pressures, a deceivingly tight labor market, continued tension return-to-office mandates, high-profile strikes, and other elements are influencing and arising from the US' complicated labor market this year.
Conflicting Labor Market Views
The labor market throughout 2024 thus far has presented a mixed picture. Vacancies, while significantly down from pandemic-era highs, appear to remain high, painting a picture of a tight job market that could indicate a strong labor market for job-seekers and an economy that is executing the vaunted "soft landing" economists hoped for following the COVID-19 pandemic. However, joblessness rates have continued to rise, hitting a recent high of 4.3% in July before ticking down to 4.1% in September. An analysis of the job-finding rate shows that the relatively high joblessness rate is largely due to depressed rates of job-finding, rather than the impact of layoffs, which tracks with high employee pessimism about the state of the job market.
The conflicting trends illustrate the much-discussed broader domestic economic disconnect: despite the US economy thriving on macro indicators, consumer confidence has plummeted – by some measures hovering around the same lows it reached immediately after the Great Recession. While stock markets have reacted positively to President Trump's reelection, it will take longer to measure its effect on consumer sentiment – and even longer for any new economic stimulus efforts to begin impacting the labor market. In the meantime, however, the labor market will remain significantly softer than top-level measures show, a benefit for employers seeking new employees.
RTO Tug-of-War Continues
The now five-year-old push-pull over return to office (RTO) mandates is alive and well years after the COVID-19 pandemic briefly forced most offices to become fully remote. Employers are continuing to push for higher levels of office attendance, with high-profile tech employers walking back remote policies in recent months, citing increases in productivity, and national office attendance reaching new highs (70% of pre-pandemic levels, according to commercial real estate firm JLL). Other data indicates that despite these high-profile RTO announcements, office attendance may have flatlined, with office utilization rates hovering at around 50% for the last two years and work-from-home time accounting for 28% of paid work days in the US over 2024 Q1, according to WFH Research Group.
For employees, RTO and attendance policies are enduringly unpopular: about a fifth to a quarter of employees in various surveys say they would leave their companies if a strict RTO policy were enforced, with losses higher among the best-performing employees, who find it easier to job-hop. Meanwhile, some employees and analysts see strict RTO policies as a backdoor strategy to affect layoffs, further souring employee sentiment on RTO.
The future of office attendance is unclear. Despite persistent employee enthusiasm for work-from-home options, there is a significant body of research showing that full-time remote work is bad for productivity, employee advancement, and retention. It is less clear, however, if full-time in-office mandates reverse this trend; many studies find that the productivity gains from RTO may be outweighed by loss of employee engagement and top talent. Hybrid options are likely to remain the most popular, although conflict over RTO vs. remote roles will also continue.
High-Profile Strikes Persist, but Historic Labor Slump Remains
Strikes and other labor actions have continued to rise in 2023 and the first several months of 2024, extending the rise of organized labor in the post-pandemic labor market. According to Bureau of Labor Statistics, the number of workers involved in "major work stoppages" in 2023 rose a dramatic 280% from 2022, led by high-profile strikes by autoworkers and Kaiser Permanente healthcare workers. 2024 appears to be following a similar pattern, with a massive East Coast dockworker strike technically ongoing (a tentative agreement was reached in early October, but the union may resume the strike in January if progress is not made), and a high-profile strike by Boeing employees that was only recently resolved (with a 38% four-year wage increase). Many of these strikes have impacted, or threatened to impact, the global supply chain, potentially snarling global logistics – a concern that will be top of mind for industry negotiators, especially as the US continues to rebuild its domestic industrial base and otherwise nearshore its supply chain.
At the same time, union membership fell to an all-time low in 2023 with just 10% of American workers belonging to a union, and strike activity – while spiking from past years – is still in a historic lull. Work stoppages are on the rise, and union membership is slightly ticking up, although the 21stcentury union resurgence that was forecasted following the high-profile unionizations in Starbucks stores and Amazon warehouses in the last several years has not materialized. Still, strikes and other labor actions are likely to continue apace or grow slightly in the coming years and months, as workers continue to demand higher pay amid persistent inflationary shocks and years of stagnated wages, and better benefits packages, seeking to reverse a trend of more expensive and less robust employer healthcare and retirement plans, for example.
More US Workplaces Consider a Four-Day Workweek
One dynamic for workers in today's often conflicted job market is experimentation with the four-day workweek, a measure popular with labor advocates and increasingly industry leaders and economists. Last month, some 45 German firms concluded a six-month trial of a four-day workweek project in which employees would work just four full days (32 hours a week), with no reduction in pay. After seeing no drops in productivity (and in some cases, increases), a more positive worker experience (employees reported higher moods, more physical activity, and more workplace engagement), and benefits such as a reduced environmental impact due to commutes, 71% of the participating firms are planning to adopt the policy. Interest has grown in the US as well: an April study by KPMG of large US companies found that a third are exploring new work schedules such as a four or four-and-a-half day schedule, and an unsurprising 80% of American workers said the change would have a positive impact on their wellbeing.
Four-day workweeks could be a potent non-monetary tool to attract and retain top talent, especially as top talent seeks to evade RTO policies and workers in general report sinking satisfaction with their pay and other benefits. While the benefit of a shortened workweek for employers is not definitively proven – existing studies have mostly had small sample sizes, and featured companies likely already friendly to the idea of a truncated week – the concept has steadily gained popularity in the US, and may soon start playing a role in the benefits packages of employers seeking non-salary ways to attract attention.
What's Next for the Labor Market
Some labor market pressures, such as the continued negotiation over RTO and short-term pessimism for job-seekers, are here to stay for the near future. However, shifts could be coming: as always, the labor market – and, more importantly, employee perceptions of it – played a large role in the recent US presidential election. American employees made clear their desire for a change, with many voters putting day-to-day economic concerns, like wages, at the center of the voting calculus. Sentiment or clear-cut policy changes could impact the labor market in coming months, driving more hiring as business owner optimism ticks up, or reducing union activity if the second Trump White House renews efforts to curb labor organizing. Employers, employees, and economists will be watching economic indicators, administration appointments, and new policy announcements closely to forecast what is next for the American labor market in 2025.
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